The South Korean tax agency warns: inspectors are authorized to search homes to seize non-custodial wallets.
South Korea’s National Tax Service (NTS) has issued a warning to digital asset holders: those who fail to settle their tax debts risk having their cold wallets seized directly from their homes. The announcement, reported by Hankook Ilbo on October 9, came directly from the NTS.
South Korean tax authorities have long been running campaigns against tax evaders who hold cryptocurrencies on local exchanges. In recent weeks, several national agencies have expanded these operations to include citizens in default on utility bills and traffic fines.
However, the NTS’s statement marks a clear escalation. The agency confirmed that it is fully aware that many investors store their digital assets offline using self-custody solutions. An NTS spokesperson stated:
“We can now monitor a non-compliant taxpayer’s crypto transaction history using [blockchain protocol] tracking programs. And if we suspect they are hiding their coins offline, we can conduct searches at their homes, confiscating [hard drives or PCs].”
Despite the NTS’s expanded powers, a gray area remains. As highlighted by the newspaper:
“Problems occur in cases where non-compliant taxpayers use overseas crypto exchanges. Since domestic law does not apply overseas, the [NTS] must rely on the cooperation of foreign governments to determine the nature of a delinquent taxpayer’s assets.”
Although the Multilateral Tax Administration Cooperation Agreement allows Seoul to cooperate with 74 countries on tax matters, this network may not be sufficient. South Korea does not have such agreements with the United States, China, or Russia.
There is also evidence suggesting that a growing number of South Korean traders are abandoning domestic platforms in favor of foreign or decentralized alternatives. Data from the Financial Supervisory Service (FSS) shows that in the first half of this year, 78.9 trillion won (about $55.6 billion) worth of crypto assets were transferred from domestic exchanges to foreign companies or wallets.
How the NTS operates on domestic exchanges
Under the National Tax Collection Act, the tax agency can issue “right of inquiry and inspection” orders on individual accounts. The NTS typically issues these orders to exchanges in cases of repeated non-payment, especially when suspected tax evaders claim they cannot settle their outstanding debts.
Once NTS investigations confirm that an individual holds crypto assets, the exchange responds by freezing the relevant wallets. All assets in the account are then transferred to NTS-controlled wallets. Some local tax offices also send ultimatums to crypto holders, warning that the agency will liquidate their assets if they do not settle their tax obligations.
If no response is received, the agency proceeds immediately with the sale of the cryptocurrencies, converting them into fiat currency at market price.
According to NTS data presented to the office of Democratic Party lawmaker Kim Young-jin, the tax service “has seized and collected digital assets from 14,140 delinquent taxpayers over the past four years.” This has led the NTS and its regional affiliates to liquidate cryptocurrencies worth 146.1 billion won (about $103 million) during the same period.
